9911796707
|
Home
Issues Involved:
(i) Validity of gifts made out of HUF funds by the karta to the wives and children of his brothers. (ii) Applicability of Section 64(1) of the Income-tax Act, 1961, to the gifts made by the assessee to the wives and children of his brothers and vice versa. (iii) Determination of whether the gifts made were "cross-gifts." Detailed Analysis: Issue (i): Validity of Gifts Made Out of HUF Funds by the Karta to the Wives and Children of His Brothers The first question was whether the Tribunal was correct in holding that the gifts made out of the HUF funds by the karta to the wives and children of his brothers were valid. The ITO had initially considered these gifts void, arguing they were part of a scheme and not made out of love and affection, thus violating Article 225 of Mulla's Hindu Law. However, the AAC and the Tribunal disagreed, concluding that the gifts were made out of love and affection and within reasonable limits as prescribed by Article 225. The Tribunal emphasized that the gifts were valid and covered by the provisions of Mulla's Hindu Law. The court upheld this view, stating that the father of a joint Hindu family could make reasonable gifts out of love and affection, and such gifts were voidable only at the instance of the sons, not third parties. The court referenced the precedent set in S. Raghbir Singh Sandhawalia v. CIT [1958] 34 ITR 719, supporting the validity of such gifts. Issue (ii): Applicability of Section 64(1) of the Income-tax Act, 1961 The second question addressed whether the gifts attracted the provisions of Section 64(1) of the Income-tax Act, 1961. The department argued that the gifts fell within the purview of Section 64(1)(i) and (iii), which includes the income of the spouse or minor child from their membership in a firm where the individual is a partner. However, the court found that this section did not relate to gifts. The provisions of Section 64(1) were not applicable as the income in question did not arise from the membership of the spouse or minor children in a firm where the assessee was a partner. Consequently, the court answered this question in the negative, ruling against the department. Issue (iii): Determination of Whether the Gifts Made Were "Cross-Gifts" The third question was whether the Tribunal was justified in holding that the gifts were not "cross-gifts." The ITO had considered the gifts as cross-gifts, implying a reciprocal arrangement. However, the AAC found that the gifts made by the assessee exceeded those received by his wife and that there was a significant lapse of time between the various gifts, with no established interconnection suggesting they were part of the same transaction. The Tribunal upheld this finding, concluding that the gifts were made independently out of love and affection. The court agreed, noting that the gifts were not interconnected and were made by different individuals, thus not qualifying as cross-gifts. The court ruled in favor of the assessee on this issue as well. Conclusion: The court answered questions Nos. 1 and 3 in the affirmative, favoring the assessee, and question No. 2 in the negative, against the department. No order as to costs was made.
|
